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09.01.2009

 

The (not so) Dreaded Pay-Cut

True, having to take a pay cut is a whole lot better than dealing with a layoff; however, the news to an employee can be just as dreadful. 

The bottom line is this:  People work so they can afford to maintain their current standard of living.  Sure, some of us actually love our jobs, but at the end of the pay period are bills to be paid.  If you're thinking your employees’ bills are not your problem.  Think again.

Most people are already living paycheck to paycheck, so the thought of having to manage the same outgo with less income is frightening.  When employees have stress about their finances, it bleeds into their work performance.  When performance wanes, so does customer satisfaction.  When customers aren’t happy, they leave.   And when customers leave ... well ... you know what happens when your customers leave (it isn't pretty)!

Have a plan before you go around cutting people’s pay.  Your employees will take the news with less strife, more confidence, and perhaps some admiration for your leadership.

1. Be real – let your employees know exactly what is happening (read "Get Straight Skinny" from Three Things You Must Do Before Laying People Off)
2. Be strategic – cut operating expenses before cutting payroll.  Think big and small (e.g., stop borrowing money, renegotiate your lease on office space, work with vendors/creditors to reduce terms and interest, sacrifice luxuries like cable TV in the break room and gourmet coffee service)
3. Be creative – for example, before instituting company-wide pay cuts - offer telecommuting options in exchange for a "comparable" pay reduction.
4. Be fair – if pay cuts are necessary, make sure it applies up, down and around the org chart – starting with you.
5. Be specific – let your staff know when pay cuts will be effective and for how long.
6. Be goal-oriented – set performance benchmarks so everyone can contribute to helping the company rebound.  Meanwhile, offer bonuses to offset the pay cut.
7. Be empowering – offer lunch ‘n learns or one-on-one coaching with a Personal Financial Planner to help your employees manage the upcoming change in their finances.
8. Be optimistic – fear and pessimism is contagious.  If you have no hope that things will turn around, your employees will be knocking on the door of another employer.
9. Be proactive – offer financial education for your staff even if things are going well with your company.  Professional growth is often a byproduct of personal growth.
10. Be passionate – remember to love what you do and do what you love (so long as it’s legal).  Run your business with everything you’ve got!

 

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